Red tape and other barriers to entry need to be diminished for potential small business owners to thrive


With SA’s economic growth forecasts sinking further this year, creating an environment for small business to survive is more important than ever. We need a competitive economy – and the jobs that go with it. But the country still faces an inordinate amount of red tape; this saps the enthusiasm of entrepreneurs keen to get their businesses off the ground and moving.

Needless bureaucracy can restrict economic development and growth, and deter foreign investors. Time is money and, with unnecessary delays, it’s hard for entrepreneurs to launch and grow their companies. This in turn crushes the prospect of creating more jobs.

In the World Bank’s Doing Business 2018 survey, SA was ranked 82nd out of 190 countries for the ease of doing business overall, a decline compared to last year. The more worrying statistic was its ranking of 136 out of 190 countries for starting a business. According to the survey, it takes an average of seven procedures and 45 days to register a business in SA. Getting access to electricity timeously is also far from optimal, while labour regulations are arduous.

Setting up a factory can be particularly difficult. Research has shown that among the requirements are up to 25 approvals, licences and authorisations from a range of departments, agencies and regulators.

Rwanda and Mauritius are faring much better. They are the only two African countries to make it into the top 50 of the World Bank’s survey index.

During a recent trip to Kigali, I was struck by the incentives and more flexible processes that have been introduced for businesses to flourish, particularly in agriculture and agribusiness. And it shows on the ground: there’s a dynamism among entrepreneurs that is inspiring.

Doing Business in South Africa 2018, the World Bank’s second such study for the country, indicates a few encouraging signs. It assesses the regulatory environments for SMEs in the country, measuring nine urban areas and four maritime ports.

Cape Town leads on dealing with construction permits and accessing electricity, with Mangaung leading on registering property and enforcing contracts. The latter has also made property transfers easier and faster by implementing a one-stop shop application process to obtain a clearance certificate covering electricity, water and rates. In addition, transparency at local deeds offices has improved. However, the report states that none of the nine urban areas surveyed perform equally well across all indicators.

It suggests that the central government can play a key role in improving local business conditions. Internal co-ordination with municipalities can also improve the situation. This has proven to have worked in the Western Cape, where the province’s Red Tape Reduction unit has helped unblock bottlenecks for thousands of people using its call centre over the past seven years.

The opening of three InvestSA provincial offices, which aim to reduce red tape for all investors looking to invest in SA – both foreign and local – is also positive, while President Cyril Ramaphosa’s recently announced stimulus package highlights the importance of boosting small business.

We need to advocate to remove anything obsolete, redundant, wasteful or confusing that diminishes competitiveness and stands in the way of economic growth and job creation, or wastes taxpayers’ time and money. In the long run, there has to be a greater push for legislation and regulations to be drafted and implemented that will strip out bureaucratic hurdles. There’s a new generation of enterprising young people in SA who are eager to carve out a future in entrepreneurship and to create jobs. Let’s make it easier for them to launch and thrive.

By Kim Cloete
Image: Clinton Prins